Thursday, July 23, 2009

Both of these charts suggest we've seen the worst of the housing crisis. Existing home sales are picking up after being very depressed, most likely because prices are down, and financing is relatively cheap. The inventory of unsold homes is falling, even as foreclosures rise, a sign that again, homes are more affordable. And the second chart reminds us that the housing slump, by this measure, was worse in the early 1980s.

4 comments:

The NAR said about 1/3 of sales were distressed. House prices will probably decline until inventory reaches more "normal" months of supply levels because shadow inventory and people locked in because of the freefall have been absent the market.

Hmmm, going from memory, which sometimes is less than exact, I didn't have any house building clients in the 1980s who encountered a choking liquidity issue (meaning banks were extending the money). That is different this time around, so there are still some looming consequences beyond the inventory of unsold houses. Many builders will not be able resume building for lack of liquidity.

Home prices are nearly done with their decline. The May and June sequential home price increases were far above their normal (measured from 1968-2000) seasonal moves and downpayments / disposable personal income and principal & interest / disposable personal income are both near or at 40-year lows. With a big generation (the Echo Boom) in its prime first-time home buying years and the supply of new homes dropping rapidly, we should see home prices rise on a YoY basis before the end of the year, in my opinion.